SUBJECT: Approval of Plan Year Insurance Premium Rates

Transcription

1 County of Santa Clara Employee Services Agency DATE: May 5, 2015 TO: FROM: Board of Supervisors Luke Leung, Deputy County Executive SUBJECT: Approval of Plan Year Insurance Premium Rates RECOMMENDED ACTION Approve proposed premium rates for the Santa Clara County employee and/or retiree benefit plans for the plan year beginning July 1, 2015 Fiscal Year 2016, subject to final approval of the various Agreements in June FISCAL IMPLICATIONS The total estimated FY 2016 County cost included in the FY 2016 Recommended Budget for the renewal of all current employee benefit plan rates for active employees is approximately $291.7 million, based on the current level of benefit plan coverage and enrollment. The amount represents a 9.3% or $24.7 million cost increase over the FY 2015 Approved Budget amount of $267 million. A subsequent review and assessment by the County s contracted employee benefits consultant, Alliant Insurance Services, Inc. (Alliant), has resulted in lowering Health Net s proposed premium rate by 0.75% which reduces County FY 2016 premium costs by approximately $564,000. The total estimated County cost for retiree medical premiums and related costs for FY 2016 is $58.1 million. This amount represents a 1.4% or a $0.8 million cost increase over the FY 2015 total estimated costs of $57.3 million. CONTRACT HISTORY The following plans provide insurance coverage for existing County benefit programs. These plans have been previously negotiated with the County s labor unions and the scope of coverage for the various benefit plans are generally stipulated in the negotiated labor agreements. Kaiser Permanente Health Plan: The original agreement was executed in Valley Health Plan: The original agreement was executed on 10/22/1985. Health Net of California: The original agreement was executed on 3/1/1999. Delta Dental: The original agreement was approved on 7/19/1978. Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 1 of 7

2 Liberty Dental: The original agreement was approved on 9/1/2010. Vision Service Plan: The original agreement was approved on 8/21/1989. Sun Life Assurance Company: The original agreement was approved on 11/26/2011. Cigna Accidental Death & Dismemberment: The original agreement was approved on 6/1/1997. UNUM Long-Term Disability: The original agreement was approved on 12/1/1994. REASONS FOR RECOMMENDATION The County renews its various benefit plan agreements on July 1st to coincide with the County s fiscal year. The recommended action requests approval for the proposed plan year rates, allowing the Administration to provide timely advance notification and billing to County employees and retirees who may be required to pay a share of the premiums for their own coverage and/or for their dependents. The actual plan renewal agreements/contracts will be completed and submitted to the Board of Supervisors for formal approval in June. On March 10, 2015, the Board approved an agreement with Alliant to provide crucial leverage and actuarial analysis when working with the County s benefit plan providers on premium rate renewals. In addition, Alliant assists the County with plan marketing to obtain the lowest pricing possible and consulting on best practices in plan design and plan offerings. Alliant reviewed the renewals for the plan year and performed an assessment of the assumptions, trends and other factors that were used by each health plan provider in its annual rate setting process. The following is a brief summary of the plan year premium changes for each of the County s plans. Kaiser Permanente Plan Renewal For the plan year, Kaiser Permanente is proposing a reduction to the County s current premium rates. Kaiser s propose decreases for the plan year are as follows: Traditional Plan - Active Employees & Early Retirees (Under age 65): 1.02% decrease Medicare Retirees (65 or older): 4.83% decrease Kaiser stated the rationale for the decrease for Active Employees and Early Retirees is based upon a combination of the reductions in cost for the County s Surcharge Buy-Out (SBO), a reduction in fees required by the Affordable Care Act (ACA) and a reduction in the medical trend factor used by Kaiser in projecting future medical costs. Kaiser applies a SBO load to the premium rates of all employers who choose to blend the rating for over-65 retirees who are not eligible for Medicare with that of Actives & Early Retirees. This blending prevents these non-medicare-eligible over-65 retirees from being charged a much higher premium rate that Kaiser would otherwise apply to this higher risk population due to its extremely unpredictable utilization patterns. The SBO load results in a Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 2 of 7

3 slightly higher rate for the actives/early retirees and a much lower rate for the non-medicare over-65 than if this group was rated separately. This practice is important to the County s retirees and their spouses who do not meet the eligibility requirements for Medicare. However, Medicare-eligible over-65 retirees are sometimes enrolled into the non-medicare group in error. Over the past year Staff has reached out to retirees who may be mistakenly enrolled in a non-medicare group. This effort has resulted in the number of non-medicare over-65 retirees to drop significantly resulting in a reduction in County s SBO cost. The Affordable Care Act introduced various fees on all health insurance plans. Some, like the Health Insurer Fee, are permanent while others, including the Patient Centered Outcomes Research Fee (PCORI) and Reinsurance Fee, are temporary. In addition, the Reinsurance Fee declines in cost each year until its expiration date in December For the 2015 plan year, the County s Kaiser premium costs include the following ACA fees, which represent 1.4% of the total premium: Federal Health Insurer Fee: $4.27 per member per month (PMPM) Federal PCORI/Reinsurance Fee: $3.16 PMPM The decrease in the rates for Medicare retirees can be attributed to the County group-specific adjustment Kaiser utilizes when analyzing this population. When determining the County s premium rates for Active Employees and Early Retirees, Kaiser looks to only the utilization of the County s Kaiser members. Based upon the large size of the County membership, Kaiser feels that the group is fully credible. However, with the County s Medicare group Kaiser instead uses a community rate with a group specific adjustment. It sets a general Medicare rate for each large geographical area and makes minor adjustments based upon each employer group s utilization. The Kaiser community rates have remained mostly flat for The substantial decrease in the County s Kaiser Medicare rate is due the County's risk improving year-over-year as compared to the community resulting in the 4.83% decrease. Alliant reviewed the renewal data to determine whether the renewal rates Kaiser provided to the County were reasonable and confirmed the proposed premium rates for the upcoming year are fair based upon the utilization of services by members, the general medical cost inflation (trend), certain fees mandated by the Affordable Care Act (ACA) and the Surcharge Buy-Out. Valley Health Plan Renewal Valley Health Plan's (VHP) proposed rate increase for the plan year is as follows: Active Employees & Early Retirees (Under age 65): 20% increase Medicare Retirees (65 or older): 20% increase For the plan year, VHP s actuarial firm, Milliman, conducted a premium rate analysis in order to set appropriate premium rates for the County s members. Milliman s analysis showed that the County s utilization is significantly higher than industry benchmarks, especially in the categories for facility outpatient services and professional services. Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 3 of 7

4 VHP informed the Administration that Milliman s analysis showed the County s renewal rates would require an increase of 48% to be in line with the County's claim utilization and medical inflation. However, VHP is allowing the County to absorb this cost increase gradually and reduced the County s renewal rate to 20%. Health Net Plan Renewal Health Net s updated proposal for the plan year includes the following proposed rates: Select POS - Active Employees/Early Retirees (Under Age 65): 9.05% increase Select POS - Retirees Age 65/Older (Medicare Supplement): 7.80% increase Out of State PPO - Retirees Age 65/Older (Medicare Supplement): 9.05% increase Flex Net - Retirees Age 65/Older (Medicare Supplement): 7.80% increase Seniority Plus - Retirees Age 65/Older (Medicare): 2.50% increase The initial renewal that Health Net submitted to the County for the plan year contained a premium increase of 9.8% for Actives/Early Retirees. Administration asked Alliant to perform an assessment of the assumptions, trends and other factors that were used by Health Net in its annual rate setting process. Alliant then used this data to review and determine whether the renewal rates Health Net provided to the County were reasonable. Alliant determined that the proposed premium rates for the upcoming year should be adjusted to better reflect the utilization of services by members, the general medical cost inflation (trend), and certain fees mandated by the ACA. Health Net agreed with Alliant s assessment and reduced its proposed premium rates by 0.75% for Actives/Early Retirees which is estimated to result in over $600,000 in savings to the County and its employees and retirees. Delta Dental Plan Renewal The County s Dental PPO plan is a self-funded program. The County contracts with Delta Dental (on a flat fee per subscriber basis) to administer the processing and payment of claims and for the use of the extensive Delta Dental provider networks along with their associated discounted fee schedules. Staff actively monitors claim utilization data throughout the year and periodically seeks an updated actuarial review to determine the appropriate rate to include in the benefit charges to departments each year. The County sets the rates to ensure an adequate level of reserves to cover for claims have not yet been paid for by the plan. The current target reserve level is an amount equal to approximately one month of claims. Due to favorable claims experience in plan year, the Plan is projected to have excess reserves at the end of the current plan year. With the use of the excess reserve amount to fund plan year claims, the Administration is recommending a decrease in the premium rate of 1.50% for the plan year. Liberty Dental Plan Renewal On June 10, 2014, the Board approved a 36-month agreement with Liberty Dental effective July 1, 2014 through June 30, This agreement provided for a 3% increase in premium rates for the plan year and another 3% premium rate increase for the Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 4 of 7

5 plan year. Vision Services Plan Renewal On June 10, 2014, the Board approved a 24-month agreement with Vision Service Plan (VSP) effective July 1, 2014 through June 30, This agreement included a rate pass for the plan year. Life Insurance Renewal The Basic Life Insurance benefit is a fully self-insured plan, administered by Mutual of Omaha. This Plan has varying benefit coverage amounts ranging from $25,000 to $300,000 for different employee groups pursuant to provisions of the County s labor contracts. The Plan has accumulated excess reserve of $2.4 million projected at the end of the FY 2015 due to favorable claims experience. In recognition of the risk of exposure of the Plan, the Administration is recommending a 50% reduction in premium rates for the next plan year bringing the excess reserve amount down to a $1.6 million level. An updated actuary evaluation is about to begin which will be used to develop rates for the FY plan year. The County s fully-insured Supplemental Life Policy with Sun Life Assurance Company contains a rate pass for the plan year. Voluntary Accidental Death & Dismemberment The County s Accidental Death & Dismemberment (AD&D) plan administered by Cigna pays benefits to a beneficiary in the event of accidental death or partial benefits to the covered employee in the event of a loss of limb, sight, and or paralysis. For the voluntary plan, the renewal rate of $0.017 per $1000 of single coverage and $0.027 per $1000 of family coverage is guaranteed through June 30, For the Executive Management and VMC AD&D plan, the County s rate of $0.017 per $1000 of coverage will remain the same for the plan year. Executive Management Long Term Disability Renewal The County s Executive Management Long Term Disability plan, administered by UNUM, is designed to pay benefits in the event that an eligible member is considered totally disabled as defined under the policy. The benefit pays 66 2/3% of the eligible member s basic monthly salary, up to a maximum of $6,800 per month. There will be a rate pass for the plan year renewal. The renewal rate will remain unchanged at $0.45 per each $100 of covered salary. Summary Premium Rate Schedule Attachment A summarizes the proposed biweekly active employee premium rates for the medical, dental, and vision insurance plans and compares those rates to the current plan year rates. Attachment B summarizes the proposed monthly rates for the retiree medical plans and compares those rates to the current plan year rates. CHILD IMPACT Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 5 of 7

6 Depending on the plan and the level of coverage the employee or retiree has enrolled for and the bargaining group to which they belong, there may be some changes to the existing contribution requirements for the affected members and their dependent children. SENIOR IMPACT Depending on the plan and the level of coverage the employee or retiree has enrolled for and the bargaining group to which they belong, there may be some changes to the existing contribution requirements for retirees and their dependents. SUSTAINABILITY IMPLICATIONS The recommended action will have no/neutral sustainability implications. BACKGROUND The County s employee benefit plans and their current level of coverage for County employees and retirees have been previously negotiated with the County s labor organizations. The County s benefit plan agreements are renewed annually and are subject to potential premium rate adjustments based on benefit utilization experience, general medical inflation (trend) and regulatory changes, including mandates required under the ACA. Each fiscal year, benefit plan providers submit premium renewal rates for County s medical, dental, vision, supplemental life and disability insurance coverage, which are reviewed and analyzed by the Administration and the County s benefits insurance broker/consultant to ensure rates are appropriate and reasonable given the actuarial assumptions and underwriting claim experience presented. Premium rates for self-insured benefit plans such as Delta Dental and Basic Life Insurance also undergo actuarial review, which forms the basis for the final rates proposed by the Administration for inclusion in the recommended budget. Over the last couple of years the County s healthcare plans have been modified to conform to ACA regulations. Some of the proposed premium rate increases can be attributed to the additional costs related to these requirements. The County will periodically conduct a competitive RFP process to ensure it is receiving the best value for plan coverage available to meet the County's benefit coverage obligations to its employees and retirees. The frequency of a RFP may depend on current insurance market conditions, customer service issues, and/or whether there are benefit coverage changes required as a result of negotiated labor contract provisions. As previously communicated to the Board in an off-agenda item dated September 9, 2014, Administration plans to conduct RFP s for the following County benefit plans within the next 12 months: Delta Dental, VSP, all the County s life insurance, and AD&D. CONSEQUENCES OF NEGATIVE ACTION If these preliminary renewal rates are not approved, the Administration will not be able to provide timely notification to employees and retirees of the upcoming rate changes and contribution requirements. STEPS FOLLOWING APPROVAL Please notify Rey Guillen, ESA Employee Benefits Department. Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 6 of 7

7 or LINKS: References: : ATTACHMENTS: PLAN YR PREMIUM CHANGE ACTIVES PLAN YR PREMIUM CHANGE RETIREES (PDF) (PDF) Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 7 of 7